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Canandaigua National Bank Annual Report
Canandaigua National Bank Annual Report
MF CNB-14905/02-16
Dear Shareholders:
In spite of the fact that interest rates did not move until the very end of 2015, we had another successful year. From a
financial standpoint, we saw diluted earnings totaling $11.05 per share. This was a 2% increase over last years earnings of
$10.84 per share. Cash dividends increased by more than 5% to $3.69 per share. Total deposits increased by 5% to $1,815 Million.
Net Loans increased to $1,832 Million, representing a nearly 7% growth rate over 2014. Our Net Interest Income increased by
more than 4% from 2014 to $72.9 Million. We saw movement of the Federal Funds rate in December 2015. This was six months
after we believed the rate would move, thus we saw no benefit in 2015 from this quarter-point increase. Looking forward to
2016, we are expecting very little Federal Funds rate movement. Our budgeting process has contemplated two scenarios to
remain flexible in our planning process: rates moving and rates staying stagnant. Once again, we are not reaching out long
term for yield on our investments, but rather we are focusing on maintaining loan assets on our books with as short a term or
re-pricing duration as possible. We continue to see intense competition in the market, yet we exceeded our loan production
budget in 2015 by $30 Million.
Non-interest income increased 6% to $39.8 Million and represents approximately 35% of our revenues. This component
is primarily composed of deposit servicing fees, asset management fees, investment advisory services, and proceeds from the
sale of mortgages to the secondary market, as well as loan servicing fees. This is in stark contrast to our peers, who on average
earn only around 15% of their income from non-interest income sources. Thus, we are well-situated to weather this low
interest rate environment juxtaposed to the plight of our industry peers. This is especially true in light of the enhanced costs
associated with the voluminous new regulations that are being thrust upon our industry.
Accomplishments
We opened our College Town Community Bank Office location in 2015, which provides us with greater access to Strong
Memorial Hospital, the University of Rochester, and the surrounding area. This area has witnessed a substantial revitalization,
and we are at its center! As is Canandaigua National Banks (CNBs) custom, we tailored the design and technology of College
Town in an effort to best meet the needs of that demographic. I strongly encourage you to visit the College Town branch, if you
have not done so already.
Due to demand and opportunity, we installed a drive-up intelligent ATM in Geneva on Hamilton Street (Route 5 & 20),
almost directly across from the Wegmans grocery store. Although we have no retail branch location in that jurisdiction, we
have many individuals and businesses in Geneva that do their banking with us (despite the presence of more than five financial
institutions physically located there). This full-service ATM allows those customers the ability to make cash and check deposits
as well as cash withdrawals, and has been cited as the reason for a surprising number of additional account openings by
Geneva residents. We are excited to track the usage of this machine for deeper market knowledge.
We increased the insurance offerings of CNB Insurance Agency to include property and casualty insurance. This has
been accomplished through our online channel, whereby we are able to provide quotes from a variety of providers, often
resulting in significant cost savings for our customers. If you have not already visited the CNB Insurance Agency website
(CNBank.insuranceaisle.com), I invite you to take a look at our website and click on the Insurance Solutions link to obtain
quotes for your home, vehicle, or any other insurance needs. Our customers, generally, have realized several hundred dollars
of savings over their current providers for equivalent coverage. The insurance industry has long encroached upon the banking
industry. It is only appropriate that we would look to the insurance industry to provide us with another source of non-interest
income in order to diversify our risk profile with respect to revenue streams. Previously, our agency had offered annuities, life
insurance, and, to some extent, Medicare gap insurance. The Affordable Care Act has created notable disruption in the health
insurance market, changing the way consumers think about and obtain health insurance. It is a very confusing topic, and
consumers are seeking trusted advisors to guide them in their decision making. This provides an opportunity for us. We look
forward to expanding our offerings within the insurance realm, in 2016 and beyond, to further deliver a comprehensive set of
financial solutions for our customers with personalized attention to the unique needs of each customer.
This year, we also added the ability to offer an interest rate swap program to our commercial loan customers. This product
is complex, and thus only discussed and used with our commercial clients for whom it might provide value. Other institutions
have used swap products as a revenue generator and thus trapped unsuspecting borrowers into agreements that they did not
fully understand. Although we do derive fee revenue from this product, revenue is NOT why we provide the service. Providing
swap services gives us the opportunity to discuss lending opportunities with individuals and institutions of a more sophisticated
nature, thus enhancing our ability to establish meaningful relationships within the community. I thank our Commercial and
Credit Administration colleagues for their hard work in evaluating this product and bringing it to fruition.
Fraud
As is standard in this digital age, we continue to see clever (and some not so clever) ways in which criminals defraud
our customers. Our cyber security and fraud teams have done an outstanding job protecting our data, as well as the data of
our customers. Our Risk Department continuously monitors the transactional behavior of our clientele. They flag anything
materially unusual and contact our clients to verify the authenticity of a given transaction. It is a delicate balance between
disrupting uncharacteristic yet legitimate customer transactions, versus allowing uncharacteristic illegitimate transactions
to process. We are continuously managing this process, as it is a constantly evolving environment.
In 2015, we saw a number of information breaches within the retail, insurance, and government sectors, allowing for
a large array of personal consumer information to be sold and otherwise exchanged on the various digital black markets. It is
becoming increasingly difficult to verify the identity of individuals interacting with our systems. This is true for establishing the
veracity of transactions initiated online, and increasingly so for establishing the identity of those contacting our Call Center with
requests to change their online password, their mailing address for statements, or any other number of actions that may allow
a fraudster access to transactional control over consumer or commercial accounts. Through the personal information data
leaks that are out of our control, fraudsters are able to answer questions related to personal identification and can validate
information that was previously difficult to obtain, such as your first childs birth date or mothers maiden name. This is
disturbing. For this reason, we are continuously looking for safer means to identify our clientele while not unduly disrupting
their ability to transact their daily affairs.
As a tale of caution, I will share with you one form of fraud attempt that I have personally witnessed at least three times in
the past year. All three times essentially consisted of a well-drafted, grammatically correct email to our CFO, purportedly from
me, telling him that we are engaging in an acquisition and that he will receive a call from a third party with wiring instructions to
consummate the deal and to email me if he has any questions. In each case, the email allegedly from me had been sent from an
email address that was altered in a manner that would not be noticed as fraudulent unless it was carefully inspected. Thus, any
reply to that email would go to the fraudster instead of me, giving the fraudster the opportunity to encourage our CFO to
proceed with the transaction. Being a bank, we have a plethora of controls and education in place to prevent these schemes
from being successful. However, many other businesses and customers have fallen prey to this and similar attacks. We must be
very careful about any wire transaction without having had a face-to-face conversation. It is imperative that dual controls are in
place and being honored. Beware!
We continuously upgrade our customer-facing systems to provide the best, safest environment to transact business. As we
upgrade our systems, it is incumbent upon our customers to also update theirs. This is something we cant control, aside from
no longer granting access to our online systems. If you are using an operating system that is no longer being supported (or
patched)such as Windows Vista, XP, or olderyou are seriously vulnerable to fraud. If you are running an outdated and/or
unsupported web browser, you are seriously vulnerable to fraud. If you are running a modern operating system or web browser
without regularly installing the recommended updates, you are seriously vulnerable to fraud. This is true whether or not you are
doing your banking online. The updates are intended to remedy vulnerabilities in the software that fraudsters use to access
your system. The older the vulnerability, the less sophisticated one must be to exploit it. Please keep your systems up to date!
Market
The Rochester market has been blessed with an influx of funds from outside the area in the name of economic
development. We received a visit from Vice President Joe Biden declaring us the Photonics Capital of the world. This is a
fantastic area of study and development that will undoubtedly lead to the creation of many new opportunities within our
community for employment and education!
Additionally, through the Finger Lakes Regional Economic Development Council, our area was awarded half a billion
dollars over the next five years for a number of economic development and infrastructure projects. This area has suffered
the decades-long demise of Kodak, and the downsizing of Bausch & Lomb and Xerox, yet it still remains viable, if not primed,
for success even when considering the long-term financial headwinds endured by our region, state, and nation over the last
eight years. We are the darling of this region, and the current is shifting to our areas advantage. Our future is bright!
From our institutions standpoint, we would love to see more movement by the Federal Reserve on interest rates. Twothirds of our revenues are derived from interest income and thus interest rate movement results in less margin compression.
Nonetheless, we are well-positioned due to our longstanding strategy to diversify our revenue streams in a manner that is less
dependent overall on interest income, to hedge against times like these. We continue to diversify our income streams and
continue to provide you, the shareholder, with the safe, sound, and profitable institution your investment philosophy has
allowed us to be.
With that in mind, our market has recently seen two events that could disrupt our local economy, yet could be another
opportunity for our institution. First, is the announcement of the purchase of First Niagara by KeyBank. This, if allowed to go
through by regulators, is likely to result in the loss of decent-paying jobs in our market. However, this provides us with the
opportunity to obtain an influx of deposit and lending relationships resulting from the market disruption, similar to what
occurred with the departure of HSBC several years ago. Additionally, there has been recent public sabre-rattling by activist
shareholders of Financial Institutions, Inc. (Five Star Bank). This creates disruption within our market, which we will take
advantage of in order to increase our market share from a deposit and lending standpoint. That being said, a greater number
of responsible lending institutions in our region will provide greater opportunity for access to credit. This produces more
economic activity, more jobs, an expanded tax base, and overall expanded opportunities for those who live in our community.
We continue to monitor both of these situations and assess the opportunities they may provide us as an institution.
Government
We continue to maintain healthy relations with our many regulatory agencies. In addition, we are committed to educating
our legislative and agency representatives to the unintended consequences of their actions in both their legislative and
regulatory capacities. We were successful in fighting off attempts by credit unions to obtain the ability to take on municipal
deposits. It is appalling that legislators would consider granting such access to institutions that dont even pay the State and
Federal taxes that contribute to those deposits. There has been a remarkable consolidation within the Credit Union industry,
which has resulted in a number of very large institutions. It is becoming very hard for that industry to draw any distinction
between what it does versus a mutual bank; mutual banks lost their tax-exempt status in 1951. Its going to be a rude awakening
when Congress finally looks to these mega credit unions to pay their fair share as you and I do.
During 2015, we also saw the implementation of the new disclosure rules for mortgage lending. Despite the fact that our
vendors were unable to modify their mortgage software within the regulators time frame, we were able to create workarounds
in our process to comply. I applaud the agility of those in our IT and Consumer Loan Department, and CNB Mortgage Company.
Team/Board Developments
Our Board of Directors saw some changeover in 2015. On June 10, Michael Goonan joined our Board. Mr. Goonan comes
to us after a distinguished career working as CFO of the University of Rochester Medical Center, where he continues to serve
as a Senior Financial Advisor.
Sadly, after more than 40 years of service to CNBs Board of Directors and more than 30 years of service to the Canandaigua
National Corporation (CNC) Board of Directors, Stephen Hamlin resigned. We thank him for his contributions over the years, and
for his attention to the needs of the community at large.
We are very excited to announce the addition of Brian Pasley to the executive management team of CNB. Mr. Pasley
started with CNB in 2011 overseeing our Consumer Lending Department and our Community Reinvestment Act Program.
He will continue in those oversight roles, as well as being more actively engaged in the planning and implementation of our
overall corporate goals. I am pleased that Brian agreed to take this on and look forward to utilizing his insights and experience.
Finally, at the end of December, Jeannie Blance retired. Jeannie served as my fathers Executive Assistant for most of
his career and for all of mine. She has worked for three generations of Hamlin leadership and did so with patience, grace, and
professionalism. We wish Jeannie and her family the best as she transitions into retirement. Thank you, Jeannie, for all you
have done for us!
Moving Forward
Looking to 2016, we have a rather aggressive set of initiatives we are planning to achieve. We are currently testing an
enhanced online banking portal, which we believe presents a much nicer fit and finish across all platforms, whether it be your
desktop computer, laptop, tablet, or any other mobile device. I am already using the platform as part of the test group and am
delighted with the system to date; I think you will be, too.
Similarly, we will be upgrading our trust and investments platform through 2016 and into 2017. This upgrade will
significantly enhance the customer experience from an ease-of-use standpoint as well as provide better reporting tools.
This new system will deliver a quality investment experience in line with the quality of our people.
There are simply too many planned 2016 initiatives for me to articulate in this letter. Although most of the focus in this
letter has been about online systems, I want to make it clear that we are committed to being a face-to-face institution. The
quality of our people and their interactions with our customers have always been our competitive advantage and will continue
to be our focus going forward. We are committed to the same balanced growth and profitability strategy that has proven to be
the most sound model to provide you, the shareholder, with solid returns on your investment over the long term. Thank you for
your confidence in Canandaigua National Corporation, and to the people who have worked so hard to make it what it is today!
We look forward to an exciting 2016!
Yours,
Consolidated balance sheets at December 31, 2015 and December 31, 2014
10
11
12
Annual Meeting
The Annual Meeting of Shareholders of Canandaigua National Corporation (the Company) will be held at the Main
Office of The Canandaigua National Bank and Trust Company, 72 South Main Street, Canandaigua, NY, 14424;
Wednesday, April 13, 2016, at 1:00 p.m.
Presented below is a summary of selected financial highlights to help you see a snapshot of our performance for the past
five years. Balance sheet information is as of the year end, while income statement and average balance information is for
the full-year period. This and all information concerning our financial performance should be read in conjunction with the
Consolidated Financial Statements and Notes thereto.
Financial Highlights
(Dollars in thousands except per share data)
2015
% Change
2014
2013
2012
2011
$
$
$
$
$
$
72,852
5,695
39,836
75,209
10,793
21,064
4.3
24.1
6.2
4.9
3.1
1.7
%
%
%
%
%
%
69,861
4,590
37,522
71,703
10,466
20,712
65,699
3,105
36,403
70,178
9,791
19,422
65,603
4,300
34,708
68,960
8,434
18,837
61,473
3,775
28,808
64,403
6,178
16,312
$
324,043
$ 1,832,066
$ 2,271,509
$ 1,815,383
$
249,195
$
183,606
13.6
6.5
7.3
5.0
27.1
7.8
%
%
%
%
%
%
285,300
1,720,154
2,117,469
1,728,522
196,072
170,327
297,438
1,545,603
1,963,014
1,722,857
60,307
156,718
281,357
1,441,455
1,887,028
1,662,863
55,843
144,363
284,139
1,276,426
1,760,764
1,546,610
58,383
135,238
$
287,571
$ 1,771,981
$ 2,199,174
$ 1,780,577
$
220,087
$
174,399
(0.4) %
7.2 %
7.2 %
2.5 %
68.8 %
8.6 %
288,727
1,653,108
2,052,207
1,736,310
130,386
160,564
285,050
1,469,954
1,909,768
1,682,229
55,769
150,486
276,661
1,383,345
1,822,867
1,605,336
52,878
138,171
273,526
1,194,213
1,695,327
1,503,083
51,575
128,393
$ 2,282,952
$ 2,576,610
6.5 %
0.8 %
2,144,170
2,557,250
2,009,225
2,436,334
1,879,397
2,115,346
1,726,172
1,858,130
$
11.18
$
11.05
$
3.69
$
96.77
$
148.72
$ 1,907,071
1.6 %
1.9 %
5.1 %
7.6 %
(0.2) %
(0.2) %
11.01
10.84
3.51
89.91
148.95
1,910,895
10.26
10.09
1.68
82.43
150.41
1,925,486
9.98
9.76
4.74
74.64
141.03
1,929,360
8.64
8.48
2.87
70.41
129.22
1,923,777
Other ratios:
Return on average assets
Return on average equity
Return on beginning equity
Dividend payout(4)
Average equity to average assets
Net interest margin
Efficiency(6)
0.96
12.08
12.37
33.41
7.93
3.58
65.86
(5.0) %
(6.4) %
(6.4) %
3.2 %
1.4 %
(3.2) %
0.2 %
1.01
12.90
13.22
32.38
7.82
3.70
65.75
0.7 %
(2.2) %
544
491
(1)
(2)
(3)
(4)
(5)
(6)
548
480
%
%
%
%
%
%
%
%
%
%
%
%
%
%
1.02
12.91
13.45
16.65
7.88
3.79
67.52
%
%
%
%
%
%
%
1.03
13.63
13.93
48.57
7.58
4.02
67.25
526
478
Includes the Company's investment in Federal Reserve Bank stock and Federal Home Loan Bank stock.
Includes junior subordinated debentures.
These assets are held in a fiduciary or agency capacity for clients and are not included in our balance sheet.
2012 includes $1.63 per share accelerated to December 2012 from February 2013.
For the respective year, price is based upon last sealed-bid auction administered by the Banks Trust Department in December 2015
Operating expenses, exclusive of intangible amortization, divided by total revenues.
537
480
%
%
%
%
%
%
%
0.96
12.70
13.18
33.84
7.57
4.05
70.02
519
459
%
%
%
%
%
%
%
#
Shares
Sold
Quarterly
Average
Sales Price
Quarterly
High
Sales Price
Quarterly
Low
Sales Price
Book
Value
Dividend
Paid
2015
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
3,673
1,880
5,704
2,809
$
$
$
$
147.33
142.81
145.65
147.44
$
$
$
$
151.60
150.00
151.00
153.00
$
$
$
$
141.00
140.00
140.00
140.00
$
$
$
$
96.77
93.79
92.60
89.57
2014
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
4,449
4,141
5,051
2,696
$
$
$
$
149.27
150.05
149.22
151.76
$
$
$
$
156.30
156.78
163.03
163.00
$
$
$
$
147.00
146.00
144.00
148.00
$
$
$
$
89.91
87.38
85.60
83.11
2013
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
5,495
None
5,941
4,909
$
$
$
$
148.83
N/A
144.39
141.96
$
$
$
$
162.60
N/A
155.00
175.00
$
$
$
$
145.00
N/A
137.50
135.00
$
$
$
$
82.43
80.45
80.28
77.55
2012
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
5,034
2,748
10,635
1,926
$
$
$
$
145.51
148.70
152.17
147.48
$
$
$
$
170.00
190.00
185.00
165.78
$
$
$
125.00
138.00
137.51
141.93
$
$
$
$
74.64
73.42
72.57
71.00
2011
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
1,492
3,216
3,036
2,948
$
$
$
$
129.22
111.34
103.87
99.89
$
$
$
$
150.00
118.13
110.00
107.21
$
$
$
$
123.75
107.50
102.50
98.69
$
$
$
$
71.95
69.55
69.34
66.71
$
$
$
$
$
1.86
1.83
1.83
1.68
1.68
-
1.63
1.61
1.50
1.44
1.43
Lawrence A. Heilbronner
Executive Vice President and Chief Financial Officer
43,900
43,732
5,571
101
4,277
109
146,828
165,591
1,832,066
15,169
6,770
11,624
15,570
2,906
25,413
2,271,509
94,671
181,559
1,720,154
14,000
6,557
9,070
15,570
3,897
23,873
2,117,469
392,199
217,847
927,354
277,983
1,815,383
197,648
51,547
23,325
2,087,903
376,357
203,761
848,162
300,242
1,728,522
144,525
51,547
22,548
1,947,142
9,732
11,325
172,920
9,732
10,394
159,572
(9,656)
(9,053)
(2,274)
182,047
1,559
183,606
2,271,509
(1,955)
168,690
1,637
170,327
2,117,469
2014
2014
74,644
5,121
73
79,838
70,340
5,574
14
2
75,930
3,227
1,444
2,315
6,986
72,852
5,695
67,157
3,483
267
2,319
6,069
69,861
4,590
65,271
Non-interest income:
Service charges on deposit accounts
Trust and investment services
Brokerage and investment subadvisory services
Net gain on sale of mortgage loans
Loan servicing, net
Loan-related fees
(Loss) gain on securities transactions, net
Other non-interest income
Total non-interest income
13,400
17,529
2,976
2,657
852
355
(56)
2,123
39,836
12,962
16,451
2,758
1,406
953
375
557
2,060
37,522
Operating expenses:
Salaries and employee benefits
Occupancy, net
Technology and data processing
Professional and other services
Marketing and public relations
Office supplies, printing and postage
Intangible amortization
Other real estate operations
FDIC insurance
Other operating expenses
Total operating expenses
43,098
8,289
6,734
3,460
2,584
1,649
991
450
1,294
6,660
75,209
39,102
7,932
6,234
3,880
2,352
1,670
1,095
641
1,314
7,483
71,703
31,784
10,793
31,090
10,466
20,624
(88)
20,712
20,991
(73)
21,064
11.18
11.01
11.05
10.84
20,991
2014
20,624
(70)
(1,290)
(307)
2,065
58
(319)
20,672
(352)
423
21,047
(73)
(88)
20,745
21,135
Number of
Shares
Outstanding
Balance at December 31, 2013
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Treasury
Stock
Accumulated
Other
Comprehensive
Income (Loss)
(8,121)
(2,378)
1,732
Noncontrolling
Interest
Total
9,732
10,160
145,593
(1,290)
(1,290)
2,065
2,065
20,712
(88)
20,624
20,712
423
(88)
21,047
1,880,305
156,718
Comprehensive income:
Change in fair value of
interest rate swaps,
net of taxes of ($861)
Change in unrealized gain on
on securities available for sale,
net of taxes of $1,112
Plus reclassification adjustment
for realized gains included in
net income on called securities,
net of taxes of ($190)
(352)
(352)
(8,598)
1,138
82
3,428
152
88
(130)
266
(6,603)
9,732
10,394
159,572
1,876,273
(1,286)
(9,053)
(7)
(1,286)
170
288
(6,603)
(7)
(1,955)
1,637
170,327
(70)
(70)
(307)
(307)
58
58
21,064
21,064
983
67
1,321
87
18,734
777
Comprehensive income:
Change in fair value of
interest rate swaps,
net of taxes of ($45)
Change in unrealized gain on
on securities available for sale,
net of taxes of ($145)
Plus reclassification adjustment
for realized gains included in
net income on called securities,
net of taxes of $37
Net income (loss) attributable to noncontrolling interest and
Canandaigua National Corporation
Total comprehensive income
Purchase of treasury stock
Sale of treasury stock
Shares issued as compensation
Exercise of stock options ($777 tax benefit)
Cash dividend - $3.69 per share
(15,992)
1,881,319
20,991
(73)
20,672
79
108
195
(761)
1,546
1,562
(6,955)
(6,955)
11,325
172,920
(9,656)
(73)
9,732
(2,336)
(319)
(2,274)
(5)
1,559
(2,336)
146
(5)
183,606
21,064
20,712
6,603
5,695
(194)
145
911
61
56
(2,657)
(162,455)
164,760
(4,780)
661
29,870
6,592
4,590
(89)
396
(236)
(194)
(557)
(1,406)
(118,000)
116,343
506
(2,735)
25,922
110,586
(163,255)
109,527
(86,644)
48,710
(34,396)
(118,499)
(3,558)
(2,554)
345
1,687
(160,934)
54,570
(58,166)
(177,869)
(1,295)
(5,788)
290
1,797
(163,578)
109,120
(22,259)
(106,800)
160,000
(77)
341
(2,336)
785
777
(78)
(6,955)
132,518
46,387
(40,722)
135,800
(42)
170
(1,286)
138
152
(95)
(6,603)
133,899
1,454
48,118
49,572
(3,757)
51,875
48,118
6,919
9,364
6,074
12,695
1,244
1,791
2014
2015
2014
1,420
6,870
100
665
2,300
900
12,255
(9,349)
1,420
6,870
100
665
2,300
900
12,255
(8,358)
2,906
3,897
Amortization expense amounted to $1.0 million and $1.1 million for the years ended December 31, 2015 and 2014, respectively.
Amortization expense is projected over the next five years as follows: 2016: $0.9 million; 2017: $0.6 million; 2018: $0.5 million;
2019: $0.4 million and 2020: $0.2 million.
(3) Securities
Amortized cost, gross unrealized gains (losses), and fair value of available-for-sale and held-to-maturity securities at December
31, 2015 are summarized as follows:
December 31, 2015
Gross Unrealized
Amortized
Cost
Securities Available for Sale:
U.S. Treasury
U.S. government sponsored enterprise obligations
State and municipal obligations
Equity securities
Total Securities Available for Sale
17
Gains
Losses
Fair
Value
505
125,787
18,113
2,700
153
117
16
(1)
(507)
(15)
(41)
504
125,433
18,216
2,675
147,105
286
(564)
146,828
3,502
161,573
517
4
913
257
(134)
-
3,506
162,352
774
165,591
1,175
(134)
166,632
Held to Maturity
Amortized
Cost
Fair Value
4,395
20,752
115,155
4,104
4,427
20,787
114,785
4,154
35,886
124,011
5,177
517
36,037
124,627
5,195
774
144,405
144,153
165,591
166,632
Amortized cost and fair value of available-for-sale and held-to-maturity securities at December 31, 2014 are summarized as
follows:
December 31, 2014
Gross Unrealized
Amortized
Cost
Securities Available for Sale:
U.S. Treasury
U.S. government sponsored enterprise obligations
State and municipal obligations
Equity securities
Total securities Available for Sale
Gains
Losses
Fair
Value
500
74,445
17,447
2,200
179
276
23
(336)
(28)
(35)
500
74,288
17,695
2,188
94,592
478
(399)
94,671
13,851
167,103
605
5
1,150
295
(22)
(523)
-
13,834
167,730
900
181,559
1,450
(545)
182,464
At December 31, 2015, and 2014, securities at amortized cost of $197.9 million and $197.1 million, respectively, were pledged
to secure municipal deposits and for other purposes required or permitted by law.
No held-to-maturity securities were sold in 2015 or 2014. No available-for-sale securities were sold in 2015. In 2014 proceeds
from the sale of available-for-sale securities totaled $1.7 million, which generated a net gain on sale of $0.6 million.
Interest on securities segregated between taxable interest and tax-exempt interest for the years ended December 31, 2015 and
2014, follows (in thousands):
Taxable
Tax-exempt
2015
2,189
2,932
2014
1,993
3,581
Total
5,121
5,574
18
Over 12 months
Fair
Unrealized
Value
Losses
4,502
88
1,189
5
1,000
40
Fair
Value
405
75,699
3,437
1,500
Total
Unrealized
Losses
1
507
15
41
74,350
431
6,692
133
81,041
564
5,332
17
21,284
117
26,615
134
5,332
17
21,284
117
26,615
134
Substantially all of the unrealized losses on the Company's securities were caused by market interest rate changes from those
in effect when the specific securities were purchased by the Company. The contractual terms of these securities do not permit
the issuer to settle the securities at a price less than par value. All securities rated by an independent rating agency carry an
investment grade rating. Because the Company generally does not intend to sell securities and it believes it is not likely to be
required to sell the securities before recovery of their amortized cost basis, which may be, and is likely to be, maturity, the
Company does not consider these securities to be other-than-temporarily impaired at December 31, 2015.
The following table presents the fair value of securities with gross unrealized losses at December 31, 2014, aggregated by
category and length of time that individual securities have been in a continuous loss position (in thousands).
Over 12 months
Fair
Unrealized
Value
Losses
23,259
289
379
4
1,000
35
Fair
Value
50,240
2,335
1,000
28,937
71
24,638
328
53,575
399
7,348
31,455
22
274
27,274
249
7,348
58,729
22
523
38,803
296
27,274
249
66,077
545
Total
Unrealized
Losses
336
28
35
The aggregate cost of the Company's cost-method investments totaled $15.7 million and $13.5 million at December 31, 2015
and 2014 respectively, of which $11.6 million and $9.1 million at each year end were in Federal Home Loan Bank stock and
Federal Reserve Bank stock, as required by law.
(4) Loans and Allowance for Loan Losses
Loans
The Company's market area is generally Ontario County and Monroe County of New York State. Substantially all loans are
made in this market area. Accordingly, the ultimate collectability of a substantial portion of the Company's loan portfolio is
susceptible to changes in the economic conditions in this area. The Company's concentrations of credit risk are as disclosed in
the following table of loan classifications. The concentrations of credit risk in related loan commitments and letters of credit
parallel the loan classifications reflected. Other than general economic risks, management is not aware of any material
concentrations of credit risk to any industry or individual borrower.
19
254,510
236,541
633,881
417,330
123,213
620,332
378,003
109,781
378,403
25,233
7,305
1,839,875
352,899
23,515
6,953
1,728,024
12,756
(20,565)
$
December 31,
2014
1,832,066
11,622
(19,492)
1,720,154
Commercial and Industrial Loans: These loans generally include term loans and lines of credit. Such loans are made available
to businesses for working capital (including inventory and receivables), business expansion (including acquisition of real estate,
expansion and improvements) and equipment purchases. As a general practice, a collateral lien is placed on equipment or other
assets owned by the borrower. These loans carry a higher risk than commercial real estate loans by the nature of the underlying
collateral, which can be business assets such as equipment and accounts receivable. To reduce the risk, management also
attempts to secure secondary collateral, such as real estate, and obtain personal guarantees of the borrowers. To further reduce
risk and enhance liquidity, these loans generally carry variable rates of interest, repricing in three- to five-year periods, and have
a maturity of five years or less. Lines of credit generally have terms of one year or less and carry floating rates of interest (e.g.,
prime plus a margin).
Commercial Mortgages: Commercial real estate loans are made to finance the purchases of real property which generally
consists of real estate with completed structures. These commercial real estate loans are secured by first liens on the real estate,
which may include apartments, commercial structures housing businesses, healthcare facilities, and other non-owner occupied
facilities. These loans are considered by the Company to be less risky than commercial and industrial loans, since they are
secured by real estate and buildings. The loans typically have adjustable interest rates, repricing in three- to five-year periods,
and require principal payments over a 10- to 25-year period. Many of these loans include call provisions within 10 to 15 years
of their origination. The Companys underwriting analysis includes credit verification, independent appraisals, a review of the
borrower's financial condition, and the underlying cash flows. These loans are typically originated in amounts of no more than
80% of the appraised value of the property serving as collateral.
Residential First-Lien Mortgages: We originate adjustable-rate and fixed-rate, one-to-four-family residential real estate loans for
the construction, purchase or refinancing of a mortgage. These loans are collateralized by owner- and non-owner-occupied
properties located in the Companys market area. They are amortized over five to 30 years. Substantially all residential loans
secured by first mortgage liens are originated by CNB Mortgage and sold to either the Bank or third-party investors. Generally,
fixed-rate mortgage loans with a maturity or call date of ten years or less and a rate of 4% or more are retained in the Companys
portfolio. For longer term, fixed-rate residential mortgages without escrow, the Company generally retains the servicing, but
sells the right to receive principal and interest to Federal Home Loan Mortgage Company, also known as Freddie Mac. All loans
not retained in the portfolio or sold to Freddie Mac are sold to unrelated third parties with servicing released. This practice allows
the Company to manage interest rate risk, liquidity risk, and credit risk. From time to time, the Company may also purchase
residential mortgage loans which are originated and serviced by third parties. In an effort to manage risk of loss and strengthen
secondary market liquidity opportunities, management typically uses secondary market underwriting, appraisal, and servicing
guidelines. Loans on one-to-four-family residential real estate are mostly originated in amounts of no more than 85% of
appraised value or have private mortgage insurance. Mortgage title insurance and hazard insurance are normally required.
Construction loans have a unique risk, because they are secured by an incomplete dwelling. This risk is reduced through periodic
site inspections, including at each loan draw period.
Residential Junior-Lien Mortgages: The Company originates home equity lines of credit and second mortgage loans (loans
secured by a second (junior) lien position on one-to-four-family residential real estate). These loans carry a higher risk than first
mortgage residential loans as they are in a second position relating to collateral. Risk is reduced through underwriting criteria,
which include credit verification, appraisals, a review of the borrower's financial condition, and personal cash flows. A security
interest, with title insurance when necessary, is taken in the underlying real estate.
20
Beginning Balance
Charge-offs
Recoveries
Provision
Ending Balance
Commercial
and industrial
3,138
(623)
347
(189)
2,673
Commercial
mortgage
2,382
(2,463)
1
4,287
4,207
Residential
mortgage first
lien
3,023
(274)
207
(495)
2,461
Residential
mortgage junior
lien
475
(7)
30
(204)
294
Consumer indirect
8,216
(2,573)
1,048
2,022
8,713
Consumer other
1,168
(634)
319
799
1,652
Loans
held for
sale
-
Unallocated
1,090
(525)
565
Total
19,492
(6,574)
1,952
5,695
20,565
of which:
Amount for loans individually
evaluated for impairment
42
1,875
1,917
2,631
2,332
2,461
294
8,713
1,652
565
18,648
6,396
5,738
12,134
248,114
628,143
417,330
123,213
378,403
25,233
7,305
12,756
1,840,497
21
Beginning Balance
Charge-offs
Recoveries
Provision
Ending Balance
Commercial
and industrial
3,165
(816)
193
596
3,138
Commercial
mortgage
1,896
(968)
1,454
2,382
Residential
mortgage -
Residential
mortgage -
first
lien
3,095
(811)
135
604
3,023
junior
lien
527
(39)
17
(30)
475
Loans
Consumer indirect
7,649
(1,858)
809
1,616
8,216
Consumer other
973
(508)
422
281
1,168
held for
sale
-
Unallocated
1,021
69
1,090
Total
18,326
(5,000)
1,576
4,590
19,492
of which:
Amount for loans individually
evaluated for impairment
159
873
1,032
2,979
1,509
3,023
475
8,216
1,168
1,090
18,460
937
9,411
10,348
235,604
610,921
378,003
109,781
352,899
23,515
6,953
11,622
1,729,298
The ratio of the allowance to total loans approximated 1.12% at December 31, 2015 as compared to 1.13% at December 31,
2014. The ratio remains nearly unchanged despite loan growth of approximately 6%, and unfavorable variances from December
31, 2014 to December 31, 2015 in the following asset quality metrics: (a) net charge off ratio increased from 0.21% to 0.26%,
(b) non-accrual loans to total loans ratio increased from 0.85% to 0.89%, (c) total past due loans to total loans ratio increased
from 1.58% to 1.67% and (d) higher amount of specific related allowance at period end from $1.0 million to $1.9 million. These
factors were offset by (a) significant improvement in the Classified (Substandard rated) Loans to Total Loans ratio reducing to
1.93% from 2.20%, (b) a general improvement in key risk metrics evaluated for the residential mortgage secured loan portfolios
(i.e. lower past due rates, lower sub 660 FICO scores, reduced charge-offs, etc.) and (c) a reduced economic factor adjustment
applied across all portfolios due to continued improving economic conditions in our market for the year (increased auto sales,
lower unemployment, stable median home prices, improved consumer confidence).
In monitoring the credit quality of the portfolio, management applies a credit quality indicator to substantially all commercial loan
relationships over $250,000. These quality indicators range from one through eight in increasing risk of loss. These ratings are
used as inputs to the calculation of the allowance for loan losses. Loans rated 1 through 4 are generally allocated a lesser
percentage allocation in the allowance for loan losses than loans rated from 5 through 8. Residential Mortgage Loans are generally
rated 9, unless they are used to partially collateralize commercial loans, in which case they carry the rating of the respective
commercial loan relationship, or if management wishes to recognize a well defined weakness or loss potential to more accurately
reflect credit risk. Unrated loans, including performing commercial loan relationships less than $250,000, are allocated a
percentage of the allowance for loan losses on a pooled basis.
Loans rated 1 include borrowers whose financial condition, liquidity, capitalization, earnings, cash flow, management and capacity to
repay are strong. If deficient in any of these areas, a borrower may still be considered for a 1 rating, if fully secured by cash, or
properly margined, listed stock, investment grade corporate bonds or U.S. Government Securities, (125% collateral value to loan
commitment).
A loan rated 2 would include borrowers who are somewhat more of a credit risk than a 1 rated borrower and therefore require more
frequent monitoring. Those borrowers would have the following qualities: cash flow has been and is expected to be adequate to
meet debt service requirements; financial statement is current, of good quality and in adequate detail; financial condition of company
compares favorably with the industry averages; earnings are generally stable; borrower consistently adheres to repayment schedule
for both principal and interest and covenants; management integrity and ability is considered sound; and industry outlook is
acceptable.
Loans rated 3 include credits whose performance is generally stable. Also included in this category are credits where the guarantor
is sufficiently strong to support operating losses and has demonstrated a willingness to do so. Additionally, loans risk rated 3 may
include the following qualities: borrowers business is tied to more economically sensitive industries; borrower may have violated one
or more financial covenants; occasional requirements for waivers, or amendments may occur, however liquidity and capitalization
are expected to continue to be acceptable; integrity of management is acceptable but ability remains to be proven; borrower may not
compare well to industry standards; relationship requires a high level of monitoring due to its complexity. Also, financial data of
affiliates may not be available or difficult to track; borrower may not provide sufficient documentation for confirming all taxable
income/losses but consistently adheres to repayment schedules for both principal and interest. Also, borrower may report a high
level of contingent liabilities.
Loans rated 4 would include credits which demonstrate any or all of the following criteria: borrowers or guarantors financial
performance shows negative trends and yet cash flow remains still adequate to repay debt; loans which continue to pay as agreed
but the Bank has not received current financial statements to confirm repayment ability and to enable management to complete a
timely annual review; most commercial construction loans; loan has been processed through automated underwriting and does not
meet managements scoring threshold; loans to start-up companies until the borrowers have achieved stabilized operations (i.e., 122
1-Superior
2-Good
3-Satisfactory
4-Watch
5-Special Mention
6-Substandard
7-Doubtful
8-Loss
Subtotal
9 and not rated
Total
$
$
Commercial
and industrial
27,659
44,681
38,960
57,688
3,666
18,097
190,751
63,759
254,510
Commercial
mortgage
81,770
210,043
269,634
11,569
13,304
586,320
47,561
633,881
Residential
mortgage first
lien
905
2,569
24,314
111
3,328
31,227
386,103
417,330
Residential
mortgage junior
lien
283
1,075
187
778
2,323
120,890
123,213
23
Consumer indirect
378,403
378,403
Consumer other
5,494
30
5,524
19,709
25,233
Loans
held for
sale
7,305
7,305
Deferred
Fees and
Costs
12,756
12,756
Total
33,153
127,639
252,647
351,823
15,346
35,537
816,145
1,036,486
1,852,631
1-Superior
2-Good
3-Satisfactory
4-Watch
5-Special Mention
6-Substandard
7-Doubtful
8-Loss
Subtotal
9 and not rated
Total
$
$
Commercial
and industrial
16,441
39,704
42,849
54,147
9,694
14,591
177,426
59,115
236,541
Residential
mortgage first
lien
694
2,573
9,189
1,114
3,602
17,172
360,831
378,003
Commercial
mortgage
92
78,192
230,372
226,593
14,434
19,173
568,856
51,476
620,332
Residential
mortgage junior
lien
120
94
237
717
1,168
108,613
109,781
Consumer indirect
352,899
352,899
Loans
held for
sale
6,953
6,953
Consumer other
899
899
22,616
23,515
Deferred
Fees and
Costs
11,622
11,622
Total
17,432
118,710
275,888
290,166
25,242
38,083
765,521
974,125
1,739,646
The following table presents a summary of information regarding nonaccruing loans and other nonperforming assets as of the
end of the respective periods (in thousands):
December 31,
2015
836
16,303
December 31,
2014
607
14,622
17,139
1,643
(228)
15,229
2,229
(225)
18,554
17,233
The following tables present, as of December 31, 2015 and December 31, 2014, additional details about the loan portfolio in the
form of an aging analysis. Amounts exclude deferred fees and costs (in thousands).
Aging Analysis as of December 31, 2015
30-59 Days
Past Due
806
389
3,160
265
5,073
209
9,902
1,366
753
-
90 Days
Or
Greater
6,420
5,772
3,580
777
1,197
52
3,767
538
52
17,139
6,808
313
30,808
90 Days
Or
Greater
1,078
9,411
3,557
814
Total
Past Due
2,432
10,781
7,121
1,739
60-89 Days
Past Due
Total
Past Due
7,625
7,527
7,493
1,042
Current
246,885
626,354
409,837
122,171
371,595
24,920
7,305
1,809,067
Total
Loans
254,510
633,881
417,330
123,213
378,403
25,233
7,305
1,839,875
> 90 Days
and
Accruing
24
252
-
Non-Accrual
Loans
6,396
5,772
3,328
777
538
22
836
30
16,303
30-59 Days
Past Due
1,265
1,370
3,545
130
4,006
76
10,392
60-89 Days
Past Due
89
19
795
768
39
1,710
341
28
15,229
5,115
143
27,331
24
Current
234,109
609,551
370,882
108,042
347,784
23,372
6,953
1,700,693
Total
Loans
236,541
620,332
378,003
109,781
352,899
23,515
6,953
1,728,024
> 90 Days
and
Accruing
141
97
341
28
607
Non-Accrual
Loans
937
9,411
3,557
717
14,622
$
$
$
$
$
$
As of and for
the year
ended
December 31,
2014
16,303
3,150
1,917
14,191
1,571
553
14,622
1,418
1,032
16,855
482
698
The details of impaired loans follow (in thousands). Recorded investment, Unpaid Principal Balance, and Specific Related
Allowance are as of the years ended December 31, 2015 and 2014 , respectively. Average Recorded Investment is a fourquarter rolling average for the respective periods. Interest Income Recognized is for the respective year-to-date periods:
December 31, 2015
With no specific allowance
Commercial and industrial
Commercial mortgage
Residential mortgage - first lien
Residential mortgage - junior lien
Consumer - other
Subtotal
With specific allowance
Commercial and industrial
Commercial mortgage
Residential mortgage - first lien
Subtotal
Total
Summary by portfolio:
Commercial
Residential
Consumer and other
Total
$
$
Recorded
Investment
6,211
2,807
3,328
777
30
13,153
Unpaid
Principal
Balance
6,234
3,390
3,680
832
30
14,166
Specific
Related
Allowance
-
Average
Recorded
Investment
2,011
4,199
3,125
791
24
10,150
Interest
Income
Recognized
246
1,235
79
11
1,571
185
2,965
3,150
16,303
186
3,029
3,215
17,381
42
1,875
1,917
1,917
180
3,674
187
4,041
14,191
1,571
12,168
4,105
30
16,303
12,839
4,512
30
17,381
1,917
1,917
10,064
4,103
24
14,191
1,481
90
1,571
$
$
$
Recorded
Investment
560
8,370
3,557
717
13,204
Unpaid
Principal
Balance
706
9,803
3,873
759
15,141
Specific
Related
Allowance
-
Average
Recorded
Investment
913
7,814
5,058
823
14,608
Interest
Income
Recognized
35
298
139
10
482
377
1,041
1,418
14,622
523
1,172
1,695
16,836
159
873
1,032
1,032
717
1,530
2,247
16,855
482
10,348
4,274
14,622
12,204
4,632
16,836
1,032
1,032
10,974
5,881
16,855
333
149
482
25
2015
948
26,903
22,517
50,368
2014
948
26,301
21,967
49,216
35,199
35,216
15,169
14,000
Depreciation and amortization expense amounted to $2.4 million and $2.3 million, for the years ended December 31, 2015 and
2014, respectively.
In June 2008, the Company completed the sale and subsequent lease-back of six banking offices. The gross gain of $1.6 million
was deferred and included in Accrued Interest Payable and Other Liabilities in the Consolidated Balance Sheets and is amortized
as a credit to Occupancy expenses on a straight-line basis for 15 years through 2023, the term of the underlying leases.
(6) Loan Servicing Assets
Changes in loan servicing assets, recorded in Other Assets in the Consolidated Balance Sheets, for each of the years presented,
and the respective period-end estimated fair values were as follows (in thousands):
2015
Balance at January 1,
Originations
Amortization
Balance at December 31,
Estimated
Book
Fair
Value
Value
2,903 $
4,272 $
705
(874)
2,734 $
4,624 $
26
2014
Book
Value
3,290 $
416
(803)
2,903 $
Estimated
Fair
Value
4,545
4,272
2015
200 %
(289)
347
3.9%
(925)
405
2014
198 %
(281)
337
3.96%
(787)
562
$ 187,585
62,812
27,586
$ 277,983
Time deposits of $250,000 or more amounted to $49.3 million at December 31, 2015, and $51.8 million at December 31, 2014.
(8) Borrowings
Borrowings at December 31, 2015 included $37.1 million of overnight borrowings (interest rates of 0.52% per annum), one $100
million term borrowing, with an expiration date of January 27, 2017 (0.95% per annum), and one $60 million term borrowing,
with an expiration date of September 14, 2017 (1.13% per annum), from the Federal Home Loan Bank of New York, and, net of
discount, a $0.5 million non-interest bearing contingent payment with no stated maturity for the acquisition of OBS.
Borrowings at December 31, 2014 included $23.9 million of overnight borrowings, and two $60 million term borrowings, with
expiration dates of February 23, 2015 (0.43% per annum) and September 23, 2015 (0.52% per annum), from the Federal Home
Loan Bank of New York (interest rate of 0.4% per annum), and, net of discount, a $0.6 million non-interest bearing contingent
payment with no stated maturity for the acquisition of OBS.
27
Unused
Collateralized by
Carrying Value
of Collateral
198,979
208,554
Residential mortgages
Commercial mortgages
FHLB stock
$
$
$
252,745
154,788
10,434
476,154
$
$
273,752
202,402
Advances under the overnight line of credit with the FHLB of New York are payable on demand and generally bear interest at
the federal funds rate plus 0.10%. The Company also has access to the FHLB's Term Advance Program, which allows the Bank
to borrow at various terms and rates, subject to the Banks pledging of eligible collateral. Advances under the Federal Reserve
Bank of New York are payable the following business day and bear interest at the Federal Reserve Bank of New Yorks discount
rate for primary credit, which is generally 0.25% to 1.00% above the target federal funds rate.
(9) Junior Subordinated Debentures and Interest Rate Swap Agreements
In September 2007, the Company issued $20.6 million of unsecured, 30-year junior subordinated deferrable interest debentures
(T3) through a wholly-owned business trust. The debentures carried a fixed interest rate of 6.32% per annum for the initial five
years, then converted to an adjustable rate for the remaining twenty-five years at LIBOR plus 1.44%, adjustable quarterly (1.95%
at December 31, 2015). The debentures' final maturity is December 2037, and became callable, in whole or in part, at par
beginning December 2012 at the Company's option, and subject to Federal Reserve Bank of New York approval. Interest is
payable quarterly. Interest payments can be deferred for up to five years, but would restrict the Company's ability to pay
dividends. At December 31, 2015, these debentures were considered Tier I Capital for regulatory purposes.
In December 2012, the Company became exposed to interest rate risk as a result of the timing of changes in interest rates
associated with T3. In consideration of the end of the fixed-rate period, the Company entered into a forward interest rate swap
agreement, which became effective on December 15, 2012 and expires on December 15, 2022. This interest rate swap
agreement modifies the repricing characteristics of the debenture from a floating-rate debt (LIBOR +1.44%) to a fixed-rate debt
(3.859%).
In June, 2006, the Company issued $30.9 million of unsecured, 30-year floating rate junior subordinated deferrable interest
debentures (T2) through a wholly-owned business trust. The debentures carry an interest rate of 3-month LIBOR plus 1.40%
(1.91% at December 31, 2015). Other significant terms of the debenture are similar to T3, except the debentures' final maturity
is June 2036, and became callable, in whole or in part, at par after June 2012.
As with T3, the Company is exposed to interest rate risk for T2. In order to reduce this risk, the Company has entered into a
series of interest rate swap agreements since 2007 with the current agreement effective as of June 15, 2011 and expiring on
June 15, 2021. The agreement modifies the repricing characteristics of T2 from a floating-rate debt (LIBOR +1.40%) to a fixedrate debt (4.81%).
With both swap agreements the Company designated them as a cash flow hedges, and they are intended to protect against the
variability of cash flows associated with the debentures. Therefore, the effective portion of the swaps unrealized gain or loss is
recorded as a component of other comprehensive income. The ineffective portion of the unrealized gain or loss, if any, is reported
in other operating income. The swap agreements are carried at fair value in other liabilities on the Consolidated Balance Sheets.
Amounts receivable or payable are recognized as accrued under the terms of the agreements, and the net differential is recorded
as an adjustment to interest expense.
The Company also utilizes interest rate swap agreements for certain variable rate commercial loans whereby the Company and
clients enter into interest rate swap agreements that result in clients paying a fixed rate to the Company and the Company paying
a variable rate to borrowers. The transaction allows the client to effectively convert a variable rate loan to a fixed rate. The
Company then enters into separate interest rate swap agreements having exact opposite matching terms with another financial
institution. The Company does not designate either interest rate swap as hedging instruments. Because the terms of the swaps
with the client and the other financial institution offset each other, with the only difference being counterparty credit risk, changes
in the fair value of the underlying derivative contracts are not materially different and do not significantly impact the Companys
results of operation. Notional values associated with the interest rate swaps, under agreements with both the clients and the
other financial institution, amounted to $26.7 million as of December 31, 2015. Fair value is carried in other assets and other
liabilities on the Consolidated Balance Sheets.
28
2015
2014
10,793
(777)
10,466
(152)
108
(922)
45
861
10,169
10,253
The components of income tax expense (benefit) relating to income from operations follow (in thousands):
Years ended December 31,
2015
Current:
Federal
State
Deferred:
Federal
State
8,924
958
9,882
834
77
911
10,793
2014
9,283
1,419
10,702
(449)
213
(236)
10,466
Income tax expense differed from the amounts computed by applying the applicable U.S. Federal corporate tax rates to pretax
income from operations as follows (dollars in thousands):
Years ended December 31,
2015
2014
11,124
(1,026)
19
673
47
(2)
(42)
10,881
(1,253)
22
1,062
50
(2)
(294)
10,793
10,466
34.0%
29
33.7%
2014
7,988
2,517
74
510
329
425
71
1,470
7,571
3,163
74
758
726
483
114
1,317
13,384
(69)
14,206
(71)
13,315
14,135
1,063
1,318
126
1,128
1,249
192
2,507
2,569
10,808
11,566
Realization of deferred tax assets is dependent upon the generation of future taxable income or the existence of sufficient taxable
income within the carryback period. A valuation allowance is provided when it is more likely than not that some portion of the
deferred tax assets will not be realized. In assessing the need for a valuation allowance, management considers the scheduled
reversal of deferred tax liabilities, the level of historical taxable income, and projected future taxable income over the periods in
which the temporary differences comprising the deferred tax assets are deductible. Based on its assessment, management
determined that no valuation allowance was needed except for that related to its nonbank subsidiaries' mortgage tax credits.
In March 2014, the New York State legislature passed changes in the state tax law. The legislation was signed into law on March
31, 2014. The legislation included changes to apportionment beginning in 2015 and a reduction in the tax rate from 7.1% to
6.5% beginning in 2016. As a result of these legislative changes, the Company was required to make adjustments to the deferred
tax asset and liability balances which resulted in a $0.2 million charge to income tax expense in 2014.
The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax
expense. No material amount of interest expense was recognized during 2015 and 2014, for any unrecognized tax benefits.
The Company is not subject to U.S. Federal tax examinations or state tax examinations for years before 2011.
(11) Stockholders Equity
Payment of dividends by the Bank to the Company is limited or restricted in certain circumstances. According to federal banking
law, the approval of the Office of the Comptroller of the Currency (OCC) is required for the declaration of dividends in any year
in which dividends exceed the total of net income for that year plus retained income for the preceding two years. At December
31, 2015, approximately $26.7 million was available for dividends to the Company without the approval of the OCC. Payment of
dividends by the Companys non-bank subsidiaries is also restricted by their respective regulatory agencies. The amount of
dividends available for payment by these companies without regulatory approval is not significant.
The Company paid a $1.83 per share dividend on common stock to shareholders on February 2, 2015 and a $1.86 per share
dividend on common stock to shareholders on August 3, 2015. In 2014, the Company paid a $1.68 per share and $1.83 per
share on common stock to shareholders in February and August, respectively.
30
$
$
2014
21,064
1,883,473
11.18
20,712
1,880,668
11.01
21,064
1,883,473
23,598
1,907,071
11.05
20,712
1,880,668
30,156
1,910,824
10.84
2015
689
2014
421
689
421
(276)
(168)
31
Weighted
Average
Exercise Price
70,649
18,734
-
$
$
$
$
44.11
41.91
-
51,915
48,483
none
$
$
44.91
44.57
At December 31, 2015, the intrinsic value of all outstanding options was approximately $5.4 million, while the intrinsic value of
vested options included in this total was approximately $5.0 million. The intrinsic value of options exercised during the years
ended December 31, 2015 and 2014, were $1.5 million and $0.4 million, respectively. No options vested in 2015 or 2014.
Options outstanding (both exercisable and unexercisable) at December 31, 2015, had exercise prices ranging from $30.04 to
$73.46. The weighted average expected life of the options is three years. Since the options have no stated expiration date, the
expected life is calculated as the number of years from grant date to the grantee's 65th birthday.
The source of shares issued upon exercise has historically been, and is expected to be, treasury shares. From time to time, the
Company expects to purchase shares for treasury to be used for these exercises. The amount of shares, timing and cost of
these purchases cannot be determined, as the Company does not know when and in what quantity participants will exercise
their options.
Stock Appreciation Rights Plan
The Company has an incentive stock plan for executives which allows for the award of Stock Appreciation Rights (SAR). The
number of rights issued is based upon the return on beginning equity in each year. SARs represent the right to receive payment
in cash or stock, at the Compensation Committee of the Board of Directors option, equal to the amount, if any, by which the
market value per share of common stock on the date of exercise exceeds the SARs grant price. Long-term SARs are exercisable
at the later of age 55 or 15 years of continuous employment with the Company or at normal retirement age (65). Medium-term
SARs are exercisable five years from the date of grant or upon retirement. The following summarizes the activity of these rights
as of and for the year ended December 31, 2015.
Long-term SARs
Weighted
Average
#
Grant
Price
Medium-term SARs
Weighted
Average
#
Grant
Price
117,510
5,507
31,608
1,455
89,954
$
$
$
$
$
$
99.07
148.95
91.90
158.81
104.19
61,265
3,668
11,650
970
52,313
$
$
$
$
$
$
130.06
148.95
93.45
148.58
107.58
65,048
103.15
13,613
82.09
32
Right Type
Per-right fair value
Expected dividend yield
Risk-free interest rate
Expected Life
Volatility
2014
MTS
$33.76
2.53%
1.32%
3.4 years
4.38%
LTS
$42.28
2.34%
1.38%
3.9 years
9.43%
MTS
$38.64
2.34%
1.38%
3.9 years
9.43%
Long-term SARs outstanding and medium-term SARs outstanding (both exercisable and unexercisable) at December 31, 2015,
had exercise prices ranging from $78.98 to $150.41. The weighted average expected life of these rights is three years. Since
these rights have no stated expiration date, the expected life is calculated as the number of years from grant date to the grantee's
60th birthday, which is the historical life for similar past rights. Based upon current assumptions, the estimated compensation
cost related to non-vested rights not yet recognized is $0.9 million, which is expected to be recognized over a weighted average
period of five years. The Company had accrued a liability of $5.3 million and $7.0 million at December 31, 2015 and 2014,
respectively, representing the accumulated fair-value vested obligation of these rights under the plan.
(15) Leases
The Company leases certain buildings and office space under operating lease arrangements. Rent expense, net of rent received
and deferred-gain on sale-leaseback, under these arrangements amounted to $2.6 million in 2015, and $2.6 million in 2014.
Real estate taxes, insurance, maintenance, and other operating expenses associated with leased buildings and office space are
generally paid by the Company.
A summary of non-cancellable, long-term operating lease commitments as of December 31, 2015, follows (in thousands):
Years ending December 31,
Amount
2016
2017
2018
2019
2020
2021 and after
2,888
2,861
2,527
2,237
2,139
7,454
Total
20,106
33
$
$
$
$
$
$
$
157,595
74,838
5,952
313,056
27,966
9,101
7,305
Carrying
Amount
(150)
-
2014
Notional
Amount
152,024
65,475
3,509
270,981
28,252
7,998
6,953
Carrying
Amount
(120)
-
Commitments to extend credit are agreements to lend to customers and generally have fixed expiration dates or other
termination clauses that may require payment of a fee, the amount of which is immaterial. Standby and commercial letters of
credit are conditional commitments issued to guarantee the performance of a customer to a third party and also require payment
of a fee. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of
an underlying contract with a third party, whereas commercial letters of credit are issued to facilitate commerce and typically
result in the commitment being funded when the underlying transaction is consummated between the customer and third party.
Because many commitments and almost all letters of credit expire without being funded in whole or in part, the notional amounts
are not estimates of future cash flows. The credit risk associated with commitments to extend credit and standby and commercial
letters of credit is essentially the same as that involved with extending loans to customers and is subject to normal credit policies.
The Company's credit policy generally requires customers to provide collateral, usually in the form of customers' operating assets
or property, prior to disbursement of approved loans.
Commitments to originate fixed-rate loans are made when a borrower executes a rate-lock agreement. At the time of execution,
the Company generally charges a rate-lock fee, which approximates the fair value of the Company's commitment. These
commitments usually have terms ranging from 30 to 45 days. Concurrently, the Company enters into commitments to sell certain
fixed-rate residential real estate loans (usually those subject to the foregoing rate-locks). These commitments to sell are recorded
in the consolidated balance sheet at estimated fair value.
The Company has committed $3.0 million as a limited partnership investment to Cephas Capital Partners, II. This Small
Business Investment Company (SBIC) is a community-bank backed mezzanine finance company. It is a follow-on investment
to our current investment in Cephas Capital Partners. At December 31, 2015, the Company had a remaining unfunded
commitment of $1.5 million. This investment is carried in Other Assets on the Consolidated Balance Sheets.
The Company has committed $0.5 million for an investment in Trillium Lakefront Partners, LLC. This venture capital fund is a
community-backed initiative in support of new business and job growth in the Company's market area. At December 31, 2015,
the Company had a remaining unfunded commitment of less than $0.1 million. This investment is carried in Other Assets on the
Consolidated Balance Sheets.
As discussed in Note 2 under the terms of the OBS purchase agreement, of the $1.0 million contingency payment, OBS is
obligated to make future payments totaling $0.5 million.
In the normal course of business, the Company has various contingent liabilities outstanding that are not included in the
Consolidated Financial Statements. Management does not anticipate any material losses as a result of these contingent
liabilities.
(17) Regulatory Matters
The Company and its subsidiaries are subject to various regulatory capital requirements administered by the federal banking
agencies. Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action, the Company and its subsidiaries must meet
specific capital guidelines that involve quantitative measures of the Company's and Bank's assets, liabilities, and certain offbalance-sheet items calculated under regulatory accounting practices. The capital amounts and classifications are also subject
to qualitative judgments by regulators about components, risk weightings, and other factors.
34
Minimum Requirement
Amount
Ratio
$
$
227,899
199,925
10.21 %
9.08 %
$
$
89,317
88,093
4.00 %
4.00 %
$
$
176,352
199,925
9.51 %
10.85 %
$
$
83,438
82,944
$
$
227,899
199,925
12.29 %
10.85 %
$
$
248,464
13.40 %
220,490
11.96 %
(Dollars in thousands)
Amount
Well-Capitalized
Ratio
Amount
Ratio
$
$
111,647
110,117
5.00 %
5.00 %
4.50 %
4.50 %
$
$
120,522
119,808
6.50 %
6.50 %
111,251
110,592
6.00 %
6.00 %
$
$
148,334
147,456
8.00 %
8.00 %
148,334
8.00 %
185,418
10.00 %
147,456
8.00 %
184,320
10.00 %
Well-Capitalized
Amount
Ratio
$
$
205,842
183,589
9.81 %
8.81 %
$
$
83,907
83,379
4.00 %
4.00 %
$
$
104,884
104,224
5.00 %
5.00 %
$
$
205,842
183,589
11.89 %
10.67 %
$
$
69,270
68,855
4.00 %
4.00 %
$
$
103,905
103,283
6.00 %
6.00 %
$
$
225,334
203,081
13.01 %
11.80 %
$
$
138,540
137,711
8.00 %
8.00 %
$
$
173,175
172,138
10.00 %
10.00 %
(Dollars in thousands)
Leverage capital (Tier 1) as percent of
three-month average assets:
Company
Bank
As percent of risk-weighted,
period-end assets
Core capital (Tier 1)
Company
Bank
Total capital (Tiers 1 and 2)
Company
Bank
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in
active markets.
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active
markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full
term of the financial instrument.
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The estimated fair values and the valuation hierarchy of the Company's financial instruments are as follows (in thousands):
$
$
$
$
$
$
3
3
2
2
$
$
$
$
1,537,400
277,983
197,648
51,547
1,428,280
300,242
144,525
51,547
2
2
$
$
Fair Value
Hierarchy
1
1, 2
2
3
3
3
Financial Liabilities:
Deposits:
Demand, savings and
money market accounts
Time deposits
Borrowings
Junior subordinated debentures
Other financial instruments:
Interest rate swap agreements, net
Letters of credit
Financial Assets:
Cash and equivalents
Securities, available-for-sale
Securities, held-to-maturity
FHLB stock and Federal Reserve Bank stock
Loans-net
Loan servicing assets
3,506
(150)
1,537,400
276,791
198,268
51,547
3,506
(150)
(3,391)
(120)
1,428,280
299,596
144,438
51,547
(3,391)
(120)
The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
Cash and Equivalents
For these short-term instruments that generally mature in 90 days or less, or carry a market rate of interest, the carrying value
approximates fair value.
Securities
Fair values for securities are determined using independent pricing services and market-participating brokers, or matrix models
using observable inputs. The pricing service and brokers use a variety of techniques to arrive at fair value including market
maker bids, quotes and pricing models. Inputs to their pricing models include recent trades, benchmark interest rates, spreads,
and actual and projected cash flows. Management obtains a single market quote or price estimate for each security. None of
the quotes or estimates is considered a binding quote, as management would only request a binding quote if management had
the positive intent to sell the securities in the foreseeable future and management believed the price quoted represented one
from a market participant with the intent and the ability to purchase. Management evaluates the supplied price quotes against
expectations of general price trends associated with changes in the yield curve and by comparing prices to the last periods price
36
There is no market for stock issued by the Federal Home Loan Bank or the Federal Reserve Bank. Member banks are required
to hold this stock. Shares can only be sold to the issuer at par. Fair value is estimated to equal book value.
Loans
Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by interest type such
as floating, adjustable, and fixed-rate, and by portfolios such as commercial, mortgage, and consumer.
The fair value of performing loans is calculated by discounting scheduled cash flows through the loans' estimated maturity using
estimated market discount rates that reflect the credit and interest rate risk inherent in the loan category. The estimate of maturity
is based on the average maturity for each loan classification.
Delinquent loans (not in foreclosure) are valued using the method noted above, and also consider the fair value of collateral for
collateral-dependent loans. While credit risk is a component of the discount rate used to value loans, delinquent loans are
presumed to possess additional risk. Therefore, the calculated fair value of loans is reduced by the allowance for loan losses.
The fair value of loans held for sale is estimated based on outstanding investor commitments or in the absence of such
commitments, is based on current yield requirements or quoted market prices.
Loan Servicing Assets
Fair value is determined through estimates provided by a third party. To estimate the fair value, the third party considers market
prices for similar assets, and the present value of expected future cash flows associated with the servicing assets calculated
using assumptions that market participants would use in estimating future servicing income and expense. Such assumptions
include estimates of the cost of servicing loans, loan default rates, an appropriate discount rate, and prepayment speeds. The
key economic assumptions used to determine the fair value of mortgage servicing rights and the sensitivity of such values to
changes in those assumptions are summarized in Note 6 of the Annual Report.
Deposits
The fair value of demand deposits, savings accounts, and money market accounts is the amount payable on demand at the
reporting date. The fair value of fixed maturity time deposits is estimated using a discounted cash flow approach that applies
current market rates to a schedule of aggregated expected maturities of time deposits.
Borrowings
The fair value of borrowings is based on quoted market prices for the identical debt when traded as an asset in an active market.
If a quoted market price is not available, fair value is calculated by discounting scheduled cash flows through the borrowings'
estimated maturity using current market rates.
Junior Subordinated Debentures
There is no active trading market for the Companys debentures. Therefore the fair value of junior subordinated debentures is
determined using an expected present value technique. The fair value of adjustable-rate debentures approximates their face
amount, while the fair value of fixed-rate debentures is calculated by discounting scheduled cash flows through the debentures
estimated maturity using current market rates.
Interest Rate Swap Agreements (Swaps)
The fair value of swaps is the amount the Company would expect to pay to terminate the agreements and is based upon the
present value of expected future cash flows using the LIBOR and Wall Street Journal Prime swap curves, the bases for the
underlying interest rates.
Other Financial Instruments
The fair values of letters of credit and unused lines of credit approximate the fee charged to make the commitments.
37
Quoted market
prices in active
markets
(Level 1)
Internal models
with significant
observable market
parameters
(Level 2)
Internal models
with significant
unobservable
parameters
(Level 3)
Total carrying
value in the
Consolidated
Balance Sheet
504
2,675
3,179
125,433
18,216
633
144,282
504
125,433
18,216
2,675
633
147,461
Liabilities
Interest rate swap agreements - designated
$
Interest rate swap agreements - non-designated
Letters of credit
Total liabilities
$
3,506
633
150
4,289
3,506
633
150
4,289
7,305
7,305
3,150
1,415
2,734
7,299
7,305
3,150
1,415
2,734
14,604
The Company values impaired loans and other real estate owned at the time the loan is identified as impaired or when title to
the property passes to the Company. The fair values of such loans and real estate owned are estimated using Level 3 inputs in
the fair value hierarchy. Each loans collateral and real estate property has a unique appraisal and managements consideration
of any discount of the value is based on factors unique to each impaired loan and real estate property. In estimating fair value,
management may use the most recent available appraisal or may obtain an updated appraisal when, in managements judgment,
conditions have changed such that the most recent appraisal may not be reflective of current fair value. The significant
unobservable input in determining the fair value is managements subjective discount on appraisals of the collateral securing
the loan or real estate property, which ranges from 10%-50%. Collateral for impaired loans may consist of real estate and/or
business assets including equipment, inventory and/or accounts receivable and the value of these assets is determined based
on appraisals by qualified licensed appraisers hired by the Company. Appraised and reported values may be discounted based
on managements historical knowledge, changes in market conditions from the time of valuation, estimated costs to sell, and/or
managements expertise and knowledge of the client and the clients business.
As more fully described in the prior Note, the Company evaluates and values loan servicing assets on a quarterly basis at their
lower of amortized cost or fair value. The fair values of these assets are estimated using Level 3 inputs in the fair value hierarchy.
Fair value is determined through estimates provided by a third party or by management by reference to rights sold on similar
loans during the quarter. When values are estimated by management using market prices for similar servicing assets, certain
discounts may be applied to reflect the differing rights underlying the loan servicing contract. These discounts may range from
25 to 75 basis points of the principal balance of the underlying loan. Such discounts represent the significant unobservable input.
38
Quoted market
prices in active
markets
(Level 1)
Measured on a recurring basis:
Assets
Securities available-for-sale:
U.S. Treasury
U.S. government sponsored
enterprise obligations
State and municipal obligation
Equity securities
Total assets
Liabilities
Interest rate swap agreement
Letters of credit
Total liabilities
Measured on a non-recurring basis:
Assets
Loans
Loans-held-for-sale
Collateral dependent impaired loans
Other assets
Other real estate owned
Loan servicing assets
Total assets
Internal models
with significant
unobservable market
parameters
(Level 3)
Total carrying
value in the
Consolidated
Balance Sheet
500
500
2,188
2,688
74,288
17,695
91,983
74,288
17,695
2,188
94,671
3,391
120
3,511
3,391
120
3,511
6,953
-
1,272
6,953
1,272
6,953
2,004
2,903
6,179
2,004
2,903
13,132
$
$
The following table shows a reconciliation of the beginning and ending balances for assets measured at fair value on a recurring
basis using significant unobservable inputs (Level 3) (in thousands).
Year Ended
December 31, 2014
Securities available for sale, beginning of period
Sales during the period
Unrealized gain included in other comprehensive income
Securities available for sale, end of period
39
$
$
143
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Board of Directors
Canandaigua National Corporation is honored
to have so many distinguished community
leaders on its Board of Directors.
(front row) Frank H. Hamlin, III, Esq.;
Sue S. Stewart, Esq.; George W. Hamlin, IV, Esq.;
Caroline C. Shipley; Lawrence A. Heilbronner
(back row) Thomas S. Richards, Esq.; Robert G. Sheridan;
Michael C. Goonan; Alan J. Stone; Daniel P. Fuller
(not pictured) Richard C. Fox
Richard C. Fox
Daniel P. Fuller
Michael C. Goonan
Caroline C. Shipley
Retired
Treasurer, First Congregational Church
Treasurer, Ontario Childrens Foundation
Audit and Finance Committee Member, Canandaigua Board
of Education
Canandaigua City School District Board of Education
Member, 1979-2009
President, 1983-1991, 2007-2009
Financial Manager, Dell Broadcasting, WCGR/WLKA, 1985-1991
Treasurer and Financial Manager, Sonnenberg Gardens, 1973-1984
Attorney
Mayor, City of Rochester, 2011- 2013
Corporation Counsel, City of Rochester, January 1, 2006-November, 2010
Chairman, President, and CEO, RGS Energy Group, Inc., and Rochester
Gas & Electric Corp, 1998-2002
Trustee, Rochester Institute of Technology
Trustee, University of Rochester
Alan J. Stone
Managing Member, Stone Family Properties LLC, 1986-present
Member, City Mini Storage LLC, 1999-present
Director, Stone Construction Equipment, Inc., 1969-2009
Chairman of the Board, Canandaigua National Corporation, 1994-2004
Co-founder and CEO, Stone Construction Equipment, Inc.,
1969-1986
James S. Fralick
Officers
Robert G. Sheridan
Retired
The Canandaigua National Bank & Trust Company, 1971-2011
Secretary, Canandaigua National Corporation, 1992-August 31, 2011
President, CNB Mortgage Company,** 2002-August 31, 2011
Director, Genesee Valley Trust Company,* 2008-December 31, 2011
Director, CNB Mortgage Company,** 1998-present
Director and President, Canandaigua Country Club
Honeoye Office
Sandra DAngelo*
Michael P. Dougherty
Robert D. Helling
Kristine A. Singer
Pittsford Office
John E. Bernacki
Pamela J. Gratzer
Barbara J. Karley*
Robert E. Wells
Rochester
Alexander Park Office
Margaret A. Eidman
Carol M. Love*
Peter S. Mohr
William G. Shaheen
Irondequoit Office
Gail Bellucco*
Arnold J. Eckert
Jack R. Herrema
Rochester
College Town
Patricia J. Bean
A. Q. Hamilton
Javier Quintana*
Annette Ramos
Stephanie E. Von Bacho
Manchester-Shortsville
Office
Rosanna Foster
Thomas L. Lynch
Cynthia J. Walton*
Mendon Office
Iva D. Doser*
Patricia L. Fiduccia
Glenn J. Marcus
Gary H. Mervis
Penfield Office
Francis A. Ponticello
Richard J. Pratt*
Michael Pudetti
John F. Schoenhardt
Perinton Office
Thomas C. Beck
T. C. Lewis
Christopher A. Pedrone*
Kal Wysokowski
Rochester
East Main Office
Andrew A. Costanza
Donald E. Jeffries
Jennifer R. Jones, CPA
Louis P. Nau*
Victor Office
Donald J. Culeton
Samantha A. Johnson*
Webster Offices
Elena M. Bernardi
Paul E. Derleth
James D. Schrader*
William K. White
*Community Office Manager
Officers
Office of the President
Officers, cont.
David P. Guzzetta, AFIM, CMFC, Vice President Investment
Officer
Adam R. Leszyk, CFP, Vice President Investment Officer
John E. Richardson, Vice President Investment Officer
Stephen A. Rossi, CFA, Vice President Investment Officer
Mary C. Szabat, Vice President Investment Officer
Lynn M. Carleton, CTFA, Vice President Trust Administration
Officer
Kevin D. Kinney, Vice President Trust Administration Officer
Catherine D. Noble, CTFA, Vice President Trust Administration
Officer
Amy K. Boyd Ertel, Esq., Assistant Vice President Trust
Administration Officer
Ramona Green, Assistant Vice President Trust Administration
Officer
Laura A. King, Assistant Vice President Trust Administration
Officer
Rita Nischal, Banking Officer Trust Administration Officer
Irondequoit
Gail Bellucco, Assistant Vice President Community Office Manager
Adelina Santiago, Community Office Assistant Manager
Manchester-Shortsville
Cynthia J. Walton, Assistant Vice President Community Office
Manager
Amy E. Eagley, Community Office Assistant Manager
Mendon
Iva D. Doser, Bank Officer Community Office Manager
Elnora N. Williams, Community Office Assistant Manager
Penfield
Richard J. Pratt, Assistant Vice President Community Office
Manager
Kristen L. Littlefield, Community Office Assistant Manager
Chili
Suzanne M. Wedgwood, Assistant Vice President Community
Office Manager
Thomas R. Telfer, Community Office Assistant Manager
Perinton
Christopher A. Pedrone, Assistant Vice President Community
Office Manager
Cynthia S. Doyle, Community Office Assistant Manager
Pittsford
Barbara J. Karley, Assistant Vice President Community Office
Manager
Barbara E. Knickerbocker, Community Office Assistant Manager
Farmington
Mark D. Allman, Assistant Vice President Community Office
Manager
Kelly A. Cochrane, Community Office Assistant Manager
Greece Latta & Long Pond
Jamie E. Vasile, Bank Officer Community Office Manager
Mara A. DeLaus, Community Office Assistant Manager
Greece Ridge
Zo Ann Soong, Assistant Vice President Community Office Manager
Donna M. Kretchmer, Community Office Assistant Manager
Henrietta
Sharon L. Garofanello, Assistant Vice President Community Office
Manager
Alicia Otero, Community Office Assistant Manager
Honeoye
Sandra L. DAngelo, Assistant Vice President Community Office
Manager
Amy L. Force, Community Office Assistant Manager
Honeoye Falls
Steven R. Benz, Assistant Vice President Community Office
Manager
Nicole M. Briggs, Community Office Assistant Manager
2 0 1 5
Naomi Best
Marie Dastin
Sue DiProjetto
N O M I N E E S
Denise Hildreth
Jason Ingalls
Derek Lane
P A S T
Lauren Kolb 2013
Kathy Amberge 2012
Brendon Crossing 2011
Darlene Rogers 2011
Lori R. Ellis 2010
Kathleen A. Housel 2009
Chris Keys 2008
Barbara Finch 2007
Jim Terwilliger 2006
Brenda Whitney 2006
Gehrig Lohrmann
Kelly Sheridan
R E C I P I E N T S
JEANNIE BLANCE
The Canandaigua National Bank & Trust (CNB) family declared December 16, 2015, Jeannie Blance
Day. On that day, we saluted Jeannie for her remarkable service to her customers and colleagues,
CNBs shareholders, and the community. A reception was held at our Main Office in Canandaigua,
where a steady stream of people dropped by to congratulate Jeannie on her well-deserved retirement
and to wish her well as she begins this new chapter of life.
Alongside three CNB presidents and thousands of employees, Jeannie has been a discreet and stable
presence for 46 years. She has been witness to, and a key ingredient of, our community banks
evolution, growth, and success. Experience, knowledge, commitment, service, mentor, multi-tasker,
grace, role model, friend, and family are all words that portray the magic Jeannie brought to CNB.
The positive impact Jeannie had on our organization will be felt for years to come.
It is with heartfelt appreciation and gratitude that we wish Jeannie and her family a happy, healthy,
fun-filled retirement. Congratulations and thank you!
Manager Javier Quintana and his team are uniquely qualified to meet the needs of CNB customers in the College Town
neighborhood. College Town staff members are trained across multiple disciplines to more efficiently meet peoples
needs, resulting in an enhanced banking experience for our customers.
STEPHEN HAMLIN
In October 2015, after 42 years of service, Stephen Hamlin resigned from the Canandaigua National
Bank & Trust (CNB) and the Canandaigua National Corporation.
Stephen served as a Director of CNB since 1973, and of CNC since 1984. During this lengthy tenure,
we have experienced impressive growth, rapidly changing technology, and incredible success. We
sincerely appreciate the leadership and support of our Directors during this time of enormous
change.
Stephen is a retired business and cultural leader, serving as Vice President of Schlegel Corp. from
1963-1984 and as Chief Executive Officer of Sonnenberg Gardens from 1996-2000. He remains active
in the Canandaigua community, serving many nonprofit groups.
We wish Stephen and his family well and thank him for his years of dedication.
Notes